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I have an array of questions related to my situation:

I am 19 years old and getting married in about 6 months. My parents were always very conscious of money, and always emphasized the importance of being a hard worker and saver. As such, I have around 23,000 dollars in savings. My fiance has about 6,000 in student loans right now, some of them subsidized. I make enough money that we don't need the money in my savings account to pay our bills.

First, how much money is a good amount for us to keep free in our savings account as a safety net if he won't be done with college for two years and therefore will be amassing more debt than income? 5,000?

Secondly, should we pay off his student loans before investing? The subsidized loans won't be gaining any interest until he graduates so I was wondering if we should just pay off the unsubsidized loans and keep the subsidized ones for the next two years?

If we were to keep 5,000 in savings and pay of the 3,000 of unsubsidized loans as I described above, that would leave us with about 15,000 dollars that is just lying around in my savings account. How should I invest this? Would you recommend high risk or low risk investments?

Thank you for any insight you can give to my situation.

EDIT: I make around 2500 per month working full time. I will hopefully be getting a raise soon. We both know how to program and will be potentially making websites together as an additional source of income should we need it. We are both pretty conservative with our spending and have budgeted our monthly income out to save about 500 dollars per month.

  • Welcome to Money.SE. You've given good details about current debt and savings, but nothing about income or spending needs from either of you. Are you in school too, or working full time? Those details would really help members to give you an insightful answer. – JoeTaxpayer Jul 20 '15 at 18:52
  • Hopefully my edit clarifies things better. – Jaci Jul 20 '15 at 19:16
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    Until you have a few more years together, I would advise against using your savings to pay your fiance's debt down. – Eric Jul 21 '15 at 12:58
  • One query, might be rude, why are you paying for his loans with your savings ? Let him graduate and get a job and pay for it himself, considering his student loans are not accruing interest. that we don't need the money in my savings account to pay our bills This may change anytime so I would be careful. – DumbCoder Jul 21 '15 at 16:05
  • @DumbCoder - Part of the reason I wondered about paying for his loans with my savings is because we wondered if it would mean he gets better financial aid next year since we wouldn't have as much in savings. And I agree, our situation could change in the blink of an eye. It's probably wise to keep as much as possible in our savings accounts. – Jaci Jul 22 '15 at 13:03
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I'd suggest waiting until a bit after you are married. To Eagle1's point, even $23,000 is not a huge sum of money.

You didn't make any mention of a desire to buy a home, but if that becomes part of the plan, I'd want every cent of liquidity I can get. I wrote Student Loans and Your First Mortgage to explain why your buying power for the house is lowered by paying that loan. In your case, $5000 is 20% of $25000. For a good 20% down purchase, I'd want those funds available.

You also don't mention retirement accounts. Depending on the home purchase timing, I'd start to think about putting aside at least the $5500 per year IRA/Roth IRA maximum.

  • Our hope was to buy a home in about 3 years, after he has settled into a job. We would wait even longer if we didn't have the 20% down payment. So I suppose if a house is a top priority, we should just be holding onto that money in savings? – Jaci Jul 22 '15 at 13:06
  • If the SL rate is low, say sub 5%, I'd hold off paying it back. I go into the math of SL vs home purchase in the linked article, but yes, with a potential purchase so soon, I'd be saving every cent I can toward the downpayment and expenses. – JoeTaxpayer Jul 22 '15 at 13:55
  • It is a pretty low rate; not sure on the exact numbers right now, I'd have to ask my fiance, but I think it was 4ish. Right now I only put enough in my 401k to get my employer match (which isn't much). Would you recommend holding off on putting any more than that in until we have a house purchased? – Jaci Jul 22 '15 at 17:39
  • Onto the next topic - Yes, deposit just to the match. At your income level, you don't want to save pretax, better to use the Roth 401(k) if available, or Roth IRA. – JoeTaxpayer Jul 22 '15 at 19:03
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Secondly, should we pay off his student loans before investing? The subsidized loans won't be gaining any interest until he graduates so I was wondering if we should just pay off the unsubsidized loans and keep the subsidized ones for the next two years?

From a purely financial standpoint, if the interest you gain on your savings is higher than the interest of the debt, then no. Otherwise, yes.

If we were to keep 5,000 in savings and pay of the 3,000 of unsubsidized loans as I described above, that would leave us with about 15,000 dollars that is just lying around in my savings account. How should I invest this? Would you recommend high risk or low risk investments?

I'm not from the US so take my answer with caution, but to me $15,000 seems a minimum safety net. Then again, it depends very much on any external help you can get in case of an emergency.

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